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Actual cash value (ACV)

What is actual cash value (ACV)?

Actual cash value is replacement cost less depreciation for age, wear and obsolescence. Because it turns on the condition and remaining useful life of each item, ACV depends directly on how carefully the inventory recorded age, hours, maintenance and physical condition at the time of loss.

ACV depends on inputs the inventory supplies: age, condition, remaining useful life and the replacement cost of a current equivalent. Where those are recorded per item, the adjuster applies the policy. Where they are missing, depreciation gets applied as a blanket percentage across a category, which is rarely accurate and never defensible line by line.

Commercial equipment complicates this further, because well-maintained machinery frequently has more remaining life than its age suggests, and lightly used electronics frequently have less. See RCV and ACV on business personal property.

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